Skip Page Banner  
Skip Navigation

ACA to Reduce Workforce by 2 Million, Mostly by Voluntary Choices, CBO Projects

Monday, February 10, 2014

By Steve Teske
Ben Penn contributed to this report.
 

Feb. 4 --The Affordable Care Act will lead to about 2 million fewer full-time workers by 2017--rising to 2.5 million by 2024--nearly all from employees voluntarily forgoing work because of the availability of government-sponsored health insurance exchanges, the Congressional Budget Office said Feb. 4.

In a report on the nation's budget and economic outlook, the CBO said the ACA will affect the labor force, mostly after 2016, when the law's major provisions are fully implemented.

The CBO said the ACA will reduce the total number of hours worked by about 1.5 percent to 2 percent from 2017 to 2024, “almost entirely because workers will choose to supply less labor--given the new taxes and other incentives they will face and the financial benefits some will receive.”

Most of this decline will be among lower-wage workers, according to the report.

The CBO said its projections of hours worked represent a decline in the number of full-time-equivalent workers of about 2 million in 2017, rising to about 2.5 million in 2024.

'Small or Negligible' Impact on Labor Force

The report said the effects of the ACA on the labor force will be most evident in some segments of the workforce and “will be small or negligible for most categories of workers.”

The report added that the reduction in full-time-equivalent employees “stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses' demand for labor.”

The White House quickly responded to charges by congressional Republicans that the law is causing employers to jettison or not create jobs by saying the private sector has added 8.1 million jobs since the ACA became law in 2010, the strongest level of job growth since the late 1990s.

“Claims that the Affordable Care Act hurts jobs are simply belied by the facts in the CBO report,” White House Press Secretary Jay Carney said in a statement. “CBO's findings are not driven by an assumption that ACA will lead employers to eliminate jobs or reduce hours, in fact, the report itself says that there is 'no compelling evidence that part-time employment has increased as a result of the ACA.' ”

“Over the longer run, CBO finds that because of this law, individuals will be empowered to make choices about their own lives and livelihoods, like retiring on time rather than working into their elderly years or choosing to spend more time with their families,” Carney said. “At the beginning of this year, we noted that as part of this new day in health care, Americans would no longer be trapped in a job just to provide coverage for their families, and would have the opportunity to pursue their dreams.”

Changes in the workforce linked to the ACA are a result of “voluntary choices” made by workers, a senior administration official, who spoke on condition of anonymity, told reporters in a telephone conference call.

Republicans Still Calling for Repeal

Congressional Republicans said the report is the latest evidence that the ACA is hurting the economy and should be repealed.

“Obamacare, the President's signature domestic policy achievement, will lead to more than 2 million fewer jobs and hurt much-needed economic growth,” Senate Finance Committee ranking member Orrin Hatch (R-Utah) said in a statement.

In response to such views, the Economic Policy Institute released a statement describing the CBO findings as “unabashedly a good thing” for working-age adults.

“These are purely voluntary labor supply decisions, not people being laid off from jobs they'd rather keep, or people looking for work and being unable to find it,” Elise Gould, director of health policy research at the Washington-based think tank, said in EPI's statement. “Working-age adults can now choose, without regard to their need to secure health insurance, whether they wish to supply labor and how much labor they wish to supply to the labor market.”

1 Million Fewer Enrollees From Launch Problems

The CBO also found 6 million individuals are expected to obtain coverage under the ACA in 2014, about 1 million fewer than estimated last spring, because of problems launching the insurance exchanges.

In addition to lower exchange enrollments, about 1 million fewer people will enroll in Medicaid and the Children's Health Insurance Program as a result of the ACA, and about 1 million more people will be uninsured, according to the projections.

The CBO now says about 8 million people will get coverage through Medicaid and CHIP under the ACA in 2014, rather than 9 million.

The report said the lower enrollment estimates “primarily reflect the significant technical problems that have been encountered in the initial phases of implementing the ACA.”

Sharp Enrollment Increase Coming

But the CBO said ACA enrollment is expected to increase sharply in 2015 and 2016 as more people respond to new coverage options.

“Starting in 2017, between 24 million and 25 million people are expected to obtain coverage each year through exchanges, and roughly 80 percent of those enrollees are expected to receive subsidies for purchasing that insurance,” the report said.

The CBO also updated its estimates for the risk corridor program under the ACA, saying such payments from the federal government to health insurers from 2015 to 2017 would total $8 billion, but corresponding collections from insurers would yield $16 billion, producing a net savings for the federal government of $8 billion. The CBO in its May 2013 report said payments and collections would offset each other.

Some congressional Republicans want to repeal the risk corridor provision as part of a deal to extend the federal government's borrowing authority, claiming it is a “bailout” for insurance companies.

The issue will be examined at a hearing by the House Committee on Oversight and Government Reform scheduled for Feb. 5.

The risk corridors program is one of three risk adjustment programs created under the ACA to protect insurers from higher-than-expected costs in covering people with health problems, which the law bars insurers from discriminating against. Under the risk corridors program, funds are to be redistributed among insurers in the individual and small group markets.

 

To contact the reporter on this story: Steve Teske in Washington at steske@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com


Text of the report is available at http://op.bna.com/dlrcases.nsf/r?Open=scrm-9fztsl.

To view additional stories from Human Resources Report buy a subscription now